Research takes the measure of networked enterprises

Power users reap the greatest benefits from social technologies and there is a clear S-curve of adoption of Enterprise 2.0 tools.

These are some of the findings from new research that has just been released by McKinsey & Company.

Grab a cuppa, I’m going to highlight it all as I think it’s a good read and worth knowing. They have looked at 1,500 companies and have lots of solid information to share.

I’ve been writing about the use of social tools and technologies inside organisations on my blog since 2009 and know many readers come here looking for research and advice to help them. I hope you find this article useful.

Ready? Let’s go…

McKinsey state the adoption by companies of Enterprise 2.0 tools, (a cluster of web-based social technologies first popularised by consumers), appears to be leveling off after a decade of rapid growth.

They also suggest that power users—businesses that deploy the more advanced technologies extensively—achieve stronger results than companies dabbling at the edge.

Let’s take a closer look
McKinsey has been tracking the adoption and diffusion of social technologies — wikis, blogs and the like — through a unique database of 1,500 companies over the past decade.

“Levels of social-technology use, by our estimates, were low in 2006. By 2008, two-thirds of the companies in our database had adopted at least one such technology, though internal diffusion was narrow: only 20 percent of all employees had used them, and no single technology had gone mainstream.

Strong evidence indicates that imitation and innovation have been driving the spread of Enterprise 2.0 tools – McKinsey.

“Using modeling techniques, we found that 35 percent of the companies had adopted social technologies in response to their adoption by competitors. Copycat behaviour was also responsible for their diffusion within organisations, though at a slightly lower rate: 25 percent of all employee usage. (Teams, for example, typically tried to burnish their performance by imitating early users of social networks and internal blogs.)

What do I think?
I certainly think copycat behaviour has played a key role. I can tell from the search terms people use on my blog that they are interested in discovering who is using what, particularly competitors.

As for innovation, company policies designed to encourage it sparked the adoption of wikis. Within enterprises, social networks help to spread innovative ideas.

McKinsey state: “According to our analysis, imitation and innovation spread Enterprise 2.0 social technologies more quickly than they did nonsocial web-based ones such as email, as estimated by academic researchers.2But their effect seemed to be weaker than others have found it to be on the diffusion of consumer technologies such as Facebook (social networks) or Netflix (social recommendations).3“

One reason for the difference is that the adoption of Enterprise 2.0 tools requires two things that are not always available: additional investment and management discipline to spur integration.

2. Enterprise 2.0 tools follow power laws

Roughly a fifth of the companies McKinsey studied will account for an estimated 50 percent of all social-technology usage in 2015:

“The steepness of the power-curve distribution diminishes slightly from 2010 to 2015 as more companies adopted these tools and broadened their internal deployment (notably of wikis and social networks).

“Our surveys also asked specifically about the perceived impact of Enterprise 2.0 tools on revenues and operating costs. These self-reported responses were combined to calculate a measure of enterprise value added.4.”

This particularly stands out for me and the calculation of value. Let’s look at how the value was calculated. Unsurprisingly it relies on people – referred to as power users.

So what happened with the power users?
McKinsey found that companies they identified as power users reported an incremental 5 percent in value added in 2010 and of up to 6.5 percent in 2014.

These findings were tested with a traditional measure of statistical significance which confirmed the correlation. They also used a more sophisticated technique (Granger tests) that indicated a causal relationship between usage and performance.5

That seems plausible: power laws should naturally skew performance benefits toward heavier users. It’s interesting that the incremental value from social technologies appears to be as large as it was from computers in the 1990s and, more recently, from technologies linked to big data.

In addition, they found significant returns from the greater diffusion of Enterprise 2.0 within companies.

The data allowed them to estimate the returns for each technology at several levels of penetration, from 25 percent to 100 percent.

They found that even incremental use among employees could significantly increase the value added for each technology (Exhibit 2).

The highest usage level of social networks, wikis, and blogs created a self-reported added value of at least 5 percent each, but the impact of other social technologies was much smaller.

They also found returns to scope: using a second social technology doubles the value added at most levels of penetration.

Exhibit 2:

New frontiers

What happens next? According to McKinsey, social technologies are approaching the top of the S-curve.

Adoption across organisations started to taper in 2012, and internal diffusion flattened out somewhat later. Yet the growing popularity of mobile and cloud technologies, as well as the Internet of Things (see “An executive’s guide to the Internet of Things”), could alter the pattern in the future.

Companies placing bets should consider how these technologies will interact with Enterprise 2.0 tools and potentially multiply their impact.

The author of the report, Jacques Bughin (pictured), who is based in McKinsey’s Brussels office says: “Meanwhile, Facebook and other digital players are developing a new generation of social tools geared to enterprise use. These providers, with their huge base of consumers, may further increase the adoption and diffusion of Enterprise 2.0 tools among and within companies. They may also open up new sources of value, both for heavy users and for companies still sitting on the sidelines.”

What do you make of this research? Does it tally with your own thoughts and experience? You’re welcome to comment below or Tweet me @AllthingsIC.